PPP Loan Fraud Investigations

PPP Loan Fraud Investigations

PPP Loan Fraud Consequences

This article discusses PPP loan fraud including federal investigations, charges, arrests, and what to do if you are facing PPP loan fraud issues.

The CARES Act of 2020 was passed by Congress on March 25, 2020, and signed into law on December 27, 2020. Per the U.S. Department of the Treasury website, the legislation “provided fast and direct economic assistance for American workers, families, small businesses, and industries. The CARES Act implemented a variety of programs to address issues related to the onset of the COVID-19 pandemic. The Consolidated Appropriations Act continued many of these programs by adding new phases, new allocations, and new guidance to address issues related to the continuation of the COVID-19 pandemic.”1

Paycheck Protection Program Fraud

Paycheck Protection Program Loans, aka PPP Loans, were designed to establish a new loan program to assist small businesses nationwide adversely impacted by the COVID–19 emergency. The CARES Act authorizes the SBA to temporarily guarantee loans under a new 7(a) loan program titled the “Paycheck Protection Program.” Loans guaranteed under the Paycheck Protection Program (PPP) will be 100 percent guaranteed by SBA, and the full principal amount of the loans may qualify for loan forgiveness.

Now, almost two years after the program was authorized, many people are finding themselves accused of PPP loan fraud. Whether it is due to a misunderstanding of the offer, errors in applying for the loan, or an intentional intent to deceive the government, fraud charges are a very serious matter.

PPP Loan Fraud Investigations Are Happening

Presently, federal prosecutors are investigating billions of dollars worth of PPP funding. It’s worth noting that these loans are not being checked by the Treasury Department staff, but rather by prosecutors who belive criminal conduct exists.

The U.S. Justice Department is already actively prosecuting hundreds of people on federal fraud charges. Per the justive.gov website, “The PPP fraud cases charged in EDVA this year involve a range of conduct, from individual business owners who inflated their payroll expenses to obtain larger loans than they otherwise would have qualified for, to a serial fraudster applying for multiple loans using false claims about business entities and income. Most charged defendants misappropriated loan proceeds for prohibited purposes, such as the purchase of houses, cars, Cessna aircraft, jewelry, and other luxury items.”2.

If You Are Contacted By Investigators

If you have been contacted by the federal government with questions about your PPP loan or EIDL loan, your situation can easily become a criminal matter. Regardless of your side of the story, if a federal prosecutor believes fraud exists, the weight of the federal government may come down on you.

The wave of arrests is very large and growing rapidly. The nationwide action involves multiple law enforcement agencies.The JDSupra website describes it this way, “In April and May 2021, the Department of Justice (DOJ) announced a wide range of arrests, indictments, sentencings, and forfeitures involving pandemic relief fraudsters. A survey of these cases indicates that the government’s enforcement efforts are not only extensive, involving multiple law enforcement agencies and task forces, but are also relying on multiple fraud statutes, including identity theft and money laundering, as well as significant forfeitures.”3

If you are under investigation or charged with loan fraud you need to immediately seek the services of an expert federal criminal defense lawyer.

What is Fraud?

Under 18 U.S. Code § 1341, fraud is generally defined as an any act done to obtain property, money, or other assets from another person, or entity using deception or false representation.

What is Loan Fraud

Loan fraud is generally applicable to instances of a person using inaccurate, misleading or forged information to obtain a loan. When someone submits a loan application with a signature, they are taking responsibility for the factual accuracy and veracity of the information provided. On the part of the lender, there is an assumption that the applicant has been diligent in preparing the application. Part of the loan processing process is the lender doing research to verify the information submitted by the applicant. When the application is found to have information that cannot be corroborated it generates questions. The loan processor may reach out to the applicant for clarification of the question(s). When the loan processor finds numerous or significant errors it raises concerns about possible loan fraud.

Actions That May Bring Federal Criminal Charges

  • Making false statements when submitting forged documents as part of the loan application
  • Preparing and submitting false information for the PPP Loan Forgiveness privilege
  • Using loan funds for anything other than the designated purpose or need
  • Making false statements to federal agents or linvestigators (process crime)

Potential Related Criminal Charges

The PPP loan process can involve multiple agencies, financial institutions, and communication methods. Consequently, any alleged act of PPP loan fraud may also include allegations of bank fraud, wire fraud, money laundering, theft of government property, and more.

PPP Loan Fraud Consequences

Anyone convicted in federal court for the offense of fraud will face harsh penalties. Consequences of a conviction of PPP loan fraud include heavy fines, a requirement to repay all money received, a federal prison sentence, and possibly forfeiture of personal assets.

A conviction of fraud can also result in other civil consequences including:

  • Permanent loss of voting rights
  • Loss of any professional license(s)
  • Barred from any government employment or elected position
  • Barred from othe federal programs or assistance
  • Deportation / Residency Issues

PPP Loan Fraud Sentencing

PPP loan fraud convictions have been made on people ranging from small business owners, police officers, and professional athletes, to celebrities and film producers. Regardless of social status, the sentences for PPP loan fraud include federal prison sentences from 6 months to many years, extended probation, high fines, and life-long criminal conviction records.

What to Do If You Are Facing Fraud Charges

Firstly, do NOT talk to any law enforcement or government employee about your situation! Hire an experienced federal crimes lawyer, and have them manage all communications with the government.

There is hope for any case. As you may know, you are presumed innocent until proven guilty beyond a reasonable doubt. In fraud cases, a huge burden for the prosecution is proving intent. As your attorney, our job is to bring the entire matter into question and present a compelling argument to counter the allegations.

If the prosecution has overwhelming evidence (i.e. paperwork, voice recording, emails, etc.), then our job is to negotiate the best possible outcome for you. In any event, our defense services can make a big impact on your future.

Possible Defenses to PPP Loan Fraud

The specifics of you situation will determine potential defense strategies for your case. There are several common defenses for charges of loan fraud. Among these are:

  • Human Error. The accused party may claim that there was no intent to commit fraud, and that they simply made a mistake in the information on the application.
  • Coercion. The accused may claim that they were forced to participate in the activity deemed to be fraud.
  • Deception. The accused may claim that they were deceived into believing they were eligible to apply for the benefits of a loan.

  • Federal cases are very serious, and managed by very skilled prosecutors with enormous resources. If you are being investigated for, or charged with, any federal crime you need to contact an experienced federal crimes defense law firm. We invite you to call us at 678-880-9360.

    FOOTNOTES & CREDITS

    • 1 USG Staff, “About the CARES Act and the Consolidated Appropriations Act”, April 13, 2021, Available from U.S. Dept. of the Treasury
    • 2 U.S. Attorney’s Office, “EDVA Takes Action Against COVID-19 Fraud in 2021”, December 20, 2021, Available from United States Department of Justice
    • 3 Arnall G. Gregory, “The Growing Wave of PPP Loan Prosecutions”, May 20, 2021, Available from JDSupra

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